Essay about Netflix Strategic Analysis

2511 Words May 26th, 2011 11 Pages
COMM 401 MIDTERM EXAM

CASE ANALYSIS: NETLIX

Prepared by: Youssef Tazi

COMM 401 Section N Student ID: 9065806

Table of Contents

I. Introduction………………………………………………………………………………3

II. External Environment……………………………………………………………………..3

1. General Environment Analysis……………………………………………………3

2. Industry Attractiveness: Porter’s Five Forces …………………………………….4

III. Internal Environment……………………………………………………………………6

1. Assessment of Netflix‘s Performance……………………………………………..6

2. Corporate Strategy and Gap Analysis…………………………………………….7

3. Netflix’s Core Competencies……………………………………………………7

IV. Strategic Alternatives……………………………………………………………………9

V.
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One the one hand, the fertility of the industry opened the doors to corporations that sighted substantial growth potential. New entrants with big pockets such as Walmart could pose a certain threat to Netflix, by exploiting a playing card based on cost reduction. On the other hand, barriers to entry became relatively significant as established video rental retailers such as Netflix have the experience and the knowhow to market movies to people. In this industry, firms that do not have a technological advantage can’t compete. The best example is Netflix’s CineMatch program that offered personalized film recommendations based on customer’s rental patterns. This way, Netflix was able to better serve its subscribers. From a cost perspective, the movie rental industry requires high capital expenditures, and the major expenses are highly related to acquisitions of DVD library and investments in technology (exhibit 2 continued). Thus, we may say that entry is difficult in this industry as the competing firms have reputation, experience and recognizable brand names.

b) Bargaining power of suppliers

To offer a wide selection of DVDs for its consumers, Netflix worked with more than 50 studios and distributors. Revenue sharing arrangements…

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